Open to requiring coverage for all; Wants public, private options

WASHINGTON - Laying out in the clearest terms yet what he wants in a healthcare overhaul, President Obama told Congress yesterday that he strongly believes Americans should have the choice of a new public health insurance plan that would compete against private insurers.

Obama said he is also "open" to requiring individuals to obtain insurance coverage - which he opposed during his campaign - as long as there is a hardship exemption for those who cannot afford it, an approach similar to the system in Massachusetts. He said he supports forcing employers to contribute to their employees' insurance but that there should be exemptions for small businesses.

In a detailed two-page letter to key senators released yesterday, the president wrote that he wants to "fully offset the cost of healthcare reform" by cutting an additional $200 billion to $300 billion from Medicare and Medicaid over the next decade, on top of the $309 billion reduction he has already proposed in the government's two main healthcare programs for the poor, elderly, and disabled.

Unlike the last president to attempt a healthcare overhaul - Bill Clinton, who submitted a 1,342-page bill to Congress in 1993 - Obama has left the drafting to lawmakers. But the letter to Senators Edward M. Kennedy, chairman of the health committee, and Max Baucus, chairman of the finance committee showed that Obama is now taking a more active, public role. On Tuesday, the president called in Democrats on the two committees beginning the monthlong process of writing healthcare legislation, which he said he wants delivered to his desk by October.

"We simply cannot afford to postpone health reform any longer," he wrote. "In short, the status quo is broken, and pouring money into a broken system only perpetuates its inefficiencies."

Healthcare costs are rising dramatically, and it would cost an estimated $1.5 trillion to cover the estimated 50 million uninsured Americans.

To find more savings in Medicaid and Medicare, Obama said he would consider a significant change in the workings of a commission of leading health economists and other specialists that advises Congress on changes to Medicare. Congress currently has to enact the panel's recommendations for them to become law.

Under one proposed approach, the commission's recommendations would become law unless Congress objected - a process similar to the one used to close military bases in the last two decades and one sure to be controversial among doctors and hospitals. They have strongly resisted some of the commission's ideas, such as lowering payments, and have successfully lobbied Congress to ignore them.

The proposal "would really change the game," said John Rother, director of legislation and public policy for AARP, which represents Americans over age 50.

"It would move reimbursement toward a more expert-based and less politically-based system, and I think it's probably a positive," he said. "But I'm sure you'd get a different view from provider groups."

The president also said he was strongly committed to cutting healthcare costs by improving how care is delivered, pointing specifically to the Mayo Clinic in Minnesota and the Cleveland Clinic in Ohio, two highly-regarded institutions whose costs fall well below the national average.

"We need to learn from their successes and replicate those best practices across our country," Obama wrote.

Obama also reiterated that no one should be denied coverage because of preexisting conditions, and that all insurance plans should provide basic coverage of preventive care and catastrophic illness. He said he would like to create a health insurance exchange - a kind of Travelocity for health insurance, something like the one Massachusetts created in its 2006 law - to make shopping for insurance easy and the prices transparent.

The letter pleased liberals, who said it sent a strong signal that the president would not abandon the idea of a public insurance option, which they see as critical to reining in the profits of the healthcare industry, but which Republicans view as a potentially deadly threat to private insurers.

"This will give them a better range of choices, make the healthcare market more competitive, and keep insurance companies honest," Obama wrote.

Richard Kirsch, head of the liberal coalition Health Care for America Now, said he was "thrilled" by the public option language in the letter: "It is now clearer than ever that this choice will be a fundamental part of the reform sent to the President's desk this year," he said.

The main insurance lobby, America's Health Insurance Plans, is waiting to see what is finally proposed, said its spokesman Robert Zirkelbach. "Consumers, providers, and employers have all raised concerns about the unintended consequences of a government-run plan and the impact it would have on the quality of care."

Obama opened and closed his letter with an appeal for cooperation with Republicans, and with business and health industry lobbies who helped torpedo the Clinton plan. Senator Chuck Grassley of Iowa, the ranking Republican on the Finance Committee and a vigorous opponent of a public insurance plan, praised the letter, which he said "doesn't draw lines in the sand," and the president's "commitment to a bipartisan outcome."

Senator Chris Dodd, a Connecticut Democrat who has been leading many of the health committee meetings in Kennedy's absence while he undergoes treatment for brain cancer, said he expected to unveil an outline next week of the panel's bill, which is supposed to be merged with Baucus's bill before the full Senate votes this summer.

Dodd said he still hoped for a bipartisan package, but acknowledged that some Republicans would not accept a public health insurance option. He said the committee was considering as many as five versions of the public plan, but "there is no consensus at this point" about how it would be structured.

The president reiterated his support to help pay for healthcare by rolling back tax deductions for the wealthiest families, but steered clear of a subject that is sure to flare up in the coming weeks: whether to tax a portion of employer-sponsored healthcare benefits, which are now exempt from federal income taxes.

After Tuesday's meeting at the White House, Baucus said that Obama suggested he was open to taxing healthcare benefits to help finance the bill, but the White House issued an immediate clarification that such a tax was not his first choice. Obama did not address the issue in his letter.

Susan Milligan of the Globe staff contributed to this report. Lisa Wangsness can be reached at lwangsness@globe.com.